The quiet policy divide between treasury and Central Bank on Gold Reserve Strategy

• tests boundaries between fiscal and monetary policy
• raises questions over liquidity and diversification

By Joshua Worlasi AMLANU,

[email protected]  / [email protected]

The nation’s push to build external buffers through gold has brought into focus a subtle but important divergence in policy posture between the Ministry of Finance and the Bank of Ghana (BoG). Both institutions support the objective of strengthening the country’s international reserves, particularly after the macroeconomic crisis that culminated in debt restructuring and an IMF-supported stabilisation programme.

Yet their approaches to the role of gold within those reserves reveal differing institutional priorities: the Treasury is advancing an ambitious gold-driven accumulation strategy, while the central bank is emphasising diversification, liquidity and portfolio risk management.

The contrast has become clearer following the government’s launch of the Ghana Accelerated National Reserve Accumulation Policy (GANRAP), which seeks to dramatically increase the country’s reserves over the next three years. At the same time, the central bank, in 2025, quietly rebalanced its reserve portfolio by converting part of its gold holdings into foreign currency assets after the metal’s share rose to an unusually high level, around US$5,000/ ounce.

These developments highlight a deeper policy question: should gold serve primarily as a strategic accumulation vehicle for national reserves, or remain one element within a diversified reserve portfolio governed by orthodox reserve management principles?

Reserve Rebuild After Crisis

The new reserve strategy comes against the backdrop of a significant macroeconomic turnaround following the 2022–2023 economic crisis. According to official data, gross international reserves rose to about US$13.8 billion at the end of 2025, equivalent to 5.7 months of import cover, up from US$8.9 billion and four months of import cover in 2024.

The improvement reflects several factors: stronger export earnings, a current account surplus, improved remittance inflows and the continued implementation of macroeconomic reforms under the IMF-supported programme. Inflation has fallen sharply to 3.3 percent as of February 2026, interest rates have declined, with monetary policy rate now at 15.5 percent and the cedi has stabilised following a period of intense volatility.

Against this backdrop, the government has moved to institutionalise a long-term strategy for reserve accumulation. Under GANRAP, Ghana aims to increase its reserve cover to 15 months of imports by 2028, a level far above traditional reserve adequacy benchmarks used by international financial institutions.

Finance Minister Cassiel Ato Forson argues that conventional adequacy thresholds underestimate the vulnerability of emerging economies to global financial shocks. In his presentation of the policy framework to Parliament, he described the current reserve level as “insufficient to provide adequate self-insurance against disruptive economic shocks.”

The new framework therefore targets an accelerated build-up of reserves, with projections showing reserves rising to 8.6 months of import cover by 2026, 11.8 months by 2027, and ultimately 15 months by 2028.

What the Literature Says About Reserve Adequacy

The government’s 15-month target stands well above conventional benchmarks used in international macroeconomic analysis.

One of the oldest and most widely cited rules is the “three-month import cover rule,” originally associated with early balance-of-payments frameworks developed by the IMF. The rule suggests that countries should hold reserves sufficient to finance at least three months of imports to cushion against external shocks.

Although widely used as a minimum threshold, modern reserve adequacy analysis has become more sophisticated.

The International Monetary Fund’s Assessing Reserve Adequacy (ARA) framework, developed after the global financial crisis, proposes a more comprehensive metric that incorporates multiple sources of external vulnerability. The framework considers:

• Short-term external debt
• Broad money (as a proxy for capital flight risk)
• Export earnings
• Other external liabilities

The IMF notes that adequate reserves for emerging markets often fall within a range of 100 to 150 percent of the ARA metric, which typically translates into roughly four to seven months of import cover, depending on country-specific conditions.

Similarly, the World Bank and other multilateral institutions generally view reserve levels of five to six months of imports as comfortable for many developing economies, particularly those with relatively stable capital flows.

A complementary metric known as the Guidotti–Greenspan rule, widely cited in academic literature and central bank policy discussions, suggests that reserves should be sufficient to cover all short-term external debt coming due within one year. The principle gained prominence after the Asian financial crisis of the late 1990s, when several emerging markets experienced severe liquidity crises due to insufficient reserves.

Other scholars have proposed additional benchmarks. Economists such as Jeanne and Rancière (2011) have argued that optimal reserves depend on the probability and cost of sudden stops in capital flows, while Aizenman and Lee (2007) highlight the role of precautionary reserve accumulation as insurance against financial crises.

Across these frameworks, it appears that emerging economies generally maintain reserves in the range of five to eight months of imports, with higher levels occasionally observed among commodity exporters or economies exposed to volatile capital flows.

Against this backdrop, Ghana’s proposed 15-month import cover target represents an unusually large buffer, positioning the country well above typical reserve adequacy thresholds.

Treasury’s Strategic Gold Accumulation Model

To achieve this ambitious target, the government is relying heavily on gold as the central mechanism for reserve expansion.

Under GANRAP, the state intends to purchase roughly 3.02 tonnes of gold per week, combining acquisitions from artisanal and small-scale mining (ASM) as well as large-scale producers.

The Ghana Gold Board will purchase about 2.45 tonnes per week from the ASM sector, equivalent to roughly 127 tonnes annually, while government will exercise pre-emption rights to acquire at least 20 percent of output from large-scale mining operations, representing about 0.57 tonnes per week.

At an assumed gold price of US$5,000 per ounce, the policy estimates that annual gross foreign exchange receipts could reach about US$25 billion.

For the Treasury, this strategy addresses a structural problem in Ghana’s previous reserve accumulation model. Between 2017 and 2024, the government relied heavily on borrowing to build reserves, raising roughly US$21.7 billion through a combination of Eurobond issuances and other external financing.

The associated interest burden was substantial. Eurobond issuances alone, totalling US$11.025 billion between 2018 and 2021, carried coupon rates between 7.6 percent and 9.6 percent, generating cumulative interest costs estimated at US$2.5 billion.

Forson argues that borrowing to build reserves creates a paradox: countries accumulate buffers intended to protect against crises while simultaneously increasing their debt vulnerabilities.

By contrast, gold accumulation financed through domestic purchases and export receipts provides a non-debt-creating pathway for strengthening reserves.

The Central Bank’s Reserve Management Perspective

While the Bank of Ghana supports the objective of building stronger external buffers, its focus lies on ensuring that reserve assets remain liquid, diversified and operationally usable.

Under the Domestic Gold Purchase Programme launched in 2021, the central bank significantly increased its gold holdings. Ghana’s gold reserves rose from roughly 8.7 tonnes before the programme began to more than 40 tonnes by October 2025.

However, a sharp rally in global gold prices amplified the portfolio effect of this accumulation. Between January and October 2025, gold prices increased by about 62 percent, substantially boosting the value of the central bank’s gold holdings.

As a result, gold came to represent approximately 42 percent of Ghana’s gross international reserves.

From the perspective of reserve management, this level of concentration raised concerns. According to data published by the World Gold Council, gold typically accounts for about 10–20 percent of reserves in many emerging market central banks, though advanced economies such as the United States, Germany and Italy hold higher shares reflecting historical accumulation.

International reserve management guidelines generally emphasise diversification across asset classes to minimise exposure to price volatility and maintain adequate liquidity.

The Bank of Ghana therefore undertook a portfolio rebalancing exercise, converting part of its gold holdings into foreign currency assets.

Governor, Dr Johnson Pandit Asiama stressed that the move did not represent a loss of national wealth. Instead, the transaction simply changed the composition of reserves, replacing some gold with liquid foreign exchange assets while keeping the overall reserve stock intact.

Liquidity Versus Valuation

At the centre of the policy divergence lies a technical but important distinction between reserve valuation and reserve usability.

Gold is widely regarded as a store of value and an effective hedge against inflation and currency instability. During periods of rising prices, it can significantly increase the nominal value of a country’s reserves.

However, gold is less liquid than foreign currency securities when central banks need to intervene rapidly in currency markets or finance urgent external payments.

Foreign currency assets, particularly US Treasury securities and other highly rated government bonds, can be sold or pledged as collateral almost instantly. By contrast, converting gold into usable foreign exchange often requires additional market transactions, potentially introducing timing and price risks.

For emerging market central banks whose currencies are not global reserve assets, liquidity considerations are especially important. Reserves must be immediately deployable to stabilise exchange rates during episodes of financial stress.

Accounting Costs and Institutional Coordination

The Domestic Gold Purchase Programme has also created accounting complexities for the central bank.

According to the Bank of Ghana, gold purchased domestically is bought at prevailing market exchange rates but recorded in the Bank’s financial accounts using the official reference rate. The difference between the two creates an accounting cost in the central bank’s financial statements.

While the cost structure of the programme has been reduced through operational adjustments, the government has indicated that it will share part of these costs as the initiative evolves into a broader national reserve accumulation strategy.

This arrangement reflects the increasing integration of fiscal and monetary policy in the management of Ghana’s external buffers.

Strategic Control of Gold Reserves

Another notable feature of the new policy is the requirement that gold accumulated under the programme can only be sold by the central bank with prior approval from Cabinet and Parliament.

In most countries, central banks retain operational authority over the composition and management of international reserves. Introducing political oversight over the sale of reserve assets suggests that gold may increasingly be treated as a strategic national asset rather than purely a monetary policy instrument.

President John Dramani Mahama in his State of the Nation Address described the new policy on gold reserve accumulation as an opportunity to “build an economic war chest to withstand global economic shocks, secure macroeconomic stability, improve the standard of living for Ghanaians, and build lasting prosperity for future generations.”

Supporters of the policy argue that such safeguards ensure that gold accumulated for national reserves cannot be rapidly liquidated during periods of fiscal pressure. Critics, however, warn that limiting central bank flexibility could complicate reserve management during periods of market stress.

The Policy Balance

The emerging divide between the Treasury and the central bank does not necessarily indicate conflict but rather reflects the interaction of two legitimate policy objectives.

The government seeks to build reserves rapidly and reduce dependence on external borrowing. The central bank, meanwhile, must ensure that the reserves accumulated remain liquid, diversified and capable of supporting exchange-rate stability.

Balancing these objectives will likely shape Ghana’s reserve management strategy in the years ahead.

If the gold accumulation strategy succeeds, Ghana could emerge as one of the emerging markets with the largest reserve buffers relative to imports. But maintaining that buffer in a form that remains usable during financial shocks will require careful coordination between fiscal and monetary authorities.

Gold may now sit at the centre of Ghana’s reserve strategy. Yet how it is integrated into the broader architecture of reserve management will ultimately determine whether the country’s ambitious accumulation plan enhances resilience—or introduces new financial vulnerabilities.